<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________
FORM 10-KSB/A1
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 29, 1996 COMMISSION FILE NUMBER 0-18515
THERAPY LASERS, INC.
(Exact name of Company as specified in its charter)
NEVADA 93-0960302
- ----------------------------------- ------------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
10850 RICHMOND AVENUE, SUITE 216, HOUSTON, TEXAS 77042
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
Company's telephone number, including area code: (713) 783-0443
- --------------------------------------------------------------------------------
(Former name and address of Company, if changed from last annual report.)
_____________
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
($0.001) Par Value Common Stock
Indicate by check mark whether the Company: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Company was
required to file such reports); and (2) has been subject to such filing
requirements for the past ninety (90) days.
Yes X No
--- ---
The issuer's revenues for the year ended February 29, 1996
were $39,571.
As of April 19, 1996, 9,456,627 shares of ($0.001) par value Common
Stock (the Company's only class of voting stock) were outstanding. The
aggregate market value of the common shares of the Company on April 19, 1996
(based upon the mean of the closing bid and asked price) held by nonaffiliates
of the Company, was approximately $322,912.
DOCUMENTS INCORPORATED BY REFERENCE:
None
1
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FORM 10-KSB
THERAPY LASERS, INC.
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
PART I
Item 1. Description of Business 3
Item 2. Description of Property 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters 7
Item 6. Management's Discussion and Analysis or
Plan of Operations 7
Item 7. Financial Statements 8
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 8
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 8
Item 10. Executive Compensation 9
Item 11. Security Ownership of Certain Beneficial
Owners and Management 11
Item 12. Certain Relationships and Related Transactions 12
Item 13. Exhibits and Reports on Form 8-K 12
</TABLE>
SIGNATURES
2
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PART I
ITEM 1. BUSINESS
(A) BUSINESS DEVELOPMENT
Therapy Lasers, Inc. (the "Company"), was organized with the name Medeci
Corporation under the laws of the State of Nevada on September 21, 1987 to
commercialize laser and related technologies. Since that time, the Company has
been engaged primarily in developing the laser technology while awaiting
approval from the Food and Drug Administration ("FDA") to market the low level
therapeutic lasers in the United States.
As of the date of this Annual Report, the Company has not received FDA
approval of the lasers. In May, 1995, the Company entered into acquisition
negotiations with Lasercare, Inc., a Houston based developer of a small handheld
laser that the Company is seeking to market in Mexico, Canada, Central America
and South America, and eventually in Europe and the Orient, while the Company is
awaiting approval from the FDA to market lasers in the United States. The
acquisition was effective March 12, 1996. An investigation is currently
underway to determine manufacturing costs and distribution by one of Mexico's
largest distributors of pharmaceuticals and medical devices.
At the Annual Meeting of the Company's shareholders on February 28, 1996, the
shareholders elected the following officers and directors of the Company:
Lucien H. Cullen Chairman and Secretary-Treasurer
Leon D. Hogg President and Chief Executive Officer
Robert C. Meador, Jr. Vice President
(B) DESCRIPTION OF THE COMPANY'S BUSINESS
Since 1987, the Company had been engaged in testing and developing laser
technology and seeking approval from the FDA to market its MLT-129 He-Ne Laser,
which had been placed in selected clinics and teaching hospitals for clinical
trial. The Company has not been able to secure FDA approval for unrestricted
commercial use of the laser even though the FDA itself classifies this low level
laser type ("LLLT") as a non significant risk device.
Europe is considered at least ten (10) years ahead of the United States
("U.S.") in laser use and technology, inasmuch as the various European
governments have not deterred the use of the LLLT. Reports from European
doctors and hospitals at the 1995 Annual Meeting of the American Society for
Laser Medicine and Surgery were critical of studies done in the U.S. for using
the low-powered (5 to 10 milliwatt) lasers. The Europeans have reported
achieving much improved results by using higher powered Gallium Arsenide
("GaAs") and Gallium Aluminum Arsenide ("GaAlAs") Lasers.
Though the MLT-129 He-Ne Laser which the Company has marketed is the oldest
and best documented of all the biostimulatory lasers, it is not practical to
build one with 100 milliwatt strength because it would be too big and cumbersome
to use efficiently. Also, inasmuch as the Helium-Neon gases are of necessity
encased in a long glass sealed tube, the units are easily broken and expensive
to replace.
3
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ITEM 1. BUSINESS (continued)
Since April of 1995, the Company's efforts have been directed toward securing
an up-to-date state-of-the-art GaAs or GaAlAs Laser offering average power from
0 to 110 milliwatts and peak power up to 55 watts to achieve higher therapeutic
effects. The Company hopes to acquire access to such a laser and have it
available for experimental use by late 1996.
(C) DESCRIPTION OF BUSINESS LASER TECHNOLOGY
All biological reactions of laser light with live tissue depend upon the
interaction of that tissue, in some way, with the effects of the laser light.
There are many kinds of laser light (each with a different wave length) and each
has the potential to produce very different results. For example, the argon
laser (green light about 488 nanometers in length) causes clotting of small
blood vessels in the retina, and is therefore useful in treating certain eye
conditions. Carbon dioxide lasers cause immediate cutting and welding of
tissue, but are invisible to the human eye. Carbon dioxide lasers have largely
replaced scalpels for use in surgery. Both argon and carbon dioxide lasers work
in the following way: A pulsed light source flows through a medium (different
for each type of laser) and non-scattered single wave length of light is passed
out of the opposite end of the laser.
He-Ne Lasers use a laser medium of Helium-Neon gas; GaAs Lasers utilize a
diode of Gallium Arsenide and GaAlAs Lasers utilize a laser of Gallium-Aluminum
Arsenide. All three of the latter named lasers are useful in treating pain,
carpal tunnel syndrome, migraine headaches, trauma, and sports related injuries.
A comparison of the above lasers is as follows:
Type Wave Length Mode Output Power Medical Use
- ----------------------- ----------- ---------- ------------ --------------
GAS LASERS
He-Ne 632.8 mm continuous 1-20 mW Biostimulation
SEMI-CONDUCTOR LASERS
GaAs 904 mm pulsed 1-110 W Biostimulation
GaAlAs 660-860 mm continuous 1-110 W Biostimulation
All biomedical laser applications are based upon the interaction of the laser
light with biological substrate. In the simplest sense, low intensity laser
light is absorbed, reflected or re-radiated by the substance so that no change
occurs within it. On the other hand, ultraviolet invisible radiation can be
absorbed, and excite electronic states in many biological molecules, leading to
photo-biological transformation at a molecular level. Therefore, the use of
laser light enhances the speed at which molecules are excited, making is
possible to prove photochemical reactions at a pica second time scale, and
further excite higher electronic states in target molecules through multiphoton
processes. Biostimulation of metabolic tissue reactions by lasers at a lower
energy level has been demonstrated both in the laboratory utilizing LLLT in
neuronal tissue culture, fibroblast and wound healing processes in vivo,
stimulated healing in animal models in hairless mice, and treatment in human
patients in Russia for ulcers, open wounds and skin healing.
(D) FEDERAL REGULATION OF LASER MEDICAL DEVICES
All laser medical devices are regulated by the FDA under two laws: The
Radiation Control for Health and Safety Act of 1968, and an Amendment to the
Public Health Services Act in the Medical Device Amendments of
4
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ITEM 1. BUSINESS (continued)
1976 to the Food, Drug and Cosmetic Act. In general, the FDA regulates laser
medical devices at three different stages: (1) the manufacturing stage, (2) the
distribution, repacking and relabeling stage, and (3) the medical application
stage. Only the second stage is directly related to Therapy Laser's business
because the Company is not engaged in the manufacture of laser medical devices.
The Company (in the past) purchased the approved medical devices from an FDA
approved manufacturer, then re-labeled and repackaged the laser medical devices
and sold the devices to licensed physicians for use by them under FDA and state
regulation in the medical treatment of patients. FDA regulation controls what
the Company can or cannot do with its laser.
All lasers marketed in the U.S. must conform to the Safety Regulations 21 CFR
1040 as established by the Center for Devices and Radiological Health ("CDRH")
of the FDA. Each laser manufactured must meet the FDA Safety Standards set
forth by the CDRH. FDA acceptance must in turn be obtained by the licensed
physician or other healthcare providers in order to use the Company's laser in
the medical field. In order to be registered as a FDA regulated
relabeler/repackager, the Company must simply relabel/repackage only FDA
manufacturer's approved laser medical devices. Compliance with Federal Safety
Regulations under FDA control are a requirement. The Company has found it
easier to buy from am approved manufacturer than to go through the approval
sequence in order to manufacture the medical laser device itself.
Therapy Lasers, Inc. has been registered with the FDA as a
relabeler/repackager and as a specification developer. A specification
developer has the authority to tell the FDA approved manufacturer which
particular specifications as to power output it desires in the laser medical
device which is thus manufactured. Registration by the FDA in this category is
an unusual requirement. Registration by the FDA in this category means that the
Company can relabel and repackage such laser device under its own name.
(E) MARKETING
In the past, the Company purchased the original MLT-129 He-Ne Laser from its
supplier and then relabeled each laser with a corporation insignia and serial
number for medical use pursuant to FDA approval, and intends to follow the same
procedure with the new THERALASE Gallium Arsenide Laser when and if it becomes
available. Therapy Lasers, Inc. will, in turn, sell the laser to the medical
provider. More than 500 doctors, clinics and hospitals have contacted the
Company in the past indicating an interest in purchasing our lasers when and if
we secure FDA approval. The manufacturer has assured the Company that it will
be able to supply an adequate number of lasers so that the Company will
experience no delays in filling purchase orders for the laser devices.
(F) RETURNS AND WARRANTIES
The Company's return and warranty policy on the MLT-129 Laser is a direct pass
through from the manufacturer, and management expects to follow the same policy
with the new laser if the Company is successful in securing distribution rights.
The Company offers whatever warranty is in existence from the manufacturer, and
also allows credit on items from which it receives credit from the
manufacturers. No losses have been experienced to date.
(G) EMPLOYEES
Therapy Lasers, Inc. has two full time employees at present, neither of which
is paid in cash. Both Mr. Hogg and Mr. Cullen are remunerated solely by stock
for their services.
5
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ITEM 1. BUSINESS (continued)
Lasercare, Inc. has no full time or paid employees.
(H) CUSTOMERS
As of the date of this report, the Company is developing a marketing plan and
customer base.
(I) COMPETITION
To the Company's knowledge there is at present one competitor seeking approval
from the FDA for a similar therapeutic laser. In management's opinion, the new
THERALASE GaAs model which the Company is negotiating for and hopes to have
available for distribution by January 1, 1997, is a superior laser. This new
unit is considerably more powerful, has a better appearance, and can be sold for
less money. Due to its unique design, it will require much less of the
physician's or licensed therapist's time in administering treatment.
(J) OTHER PRODUCTS/SERVICES
The Company is currently exploring other income-producing ideas not
necessarily in the medical field. Since Therapy Lasers, Inc. is a public
corporation with more than 450 shareholders in 35 states, it is an ideal vehicle
to pursue such avenues.
ITEM 2. PROPERTIES
The Company's executive and laser technology facilities occupy approximately
1200 sq. ft. at 10850 Richmond Avenue, Suite 216, Houston, Texas 77042,
pursuant to a month-to-month lease.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's shareholders voted, in their annual meeting on February 27,
1995, to change the Company's name from Medici Corporation to Therapy Lasers,
Inc., and to sell the Wellness subsidiary. THS Wellness was sold on June 21,
1995 to American Medical Corporation.
At the February 28, 1996 meeting of the shareholders, acquisition of
LaserCare, Inc. was discussed and unanimously approved to be acquired as a
wholly-owned subsidiary of LaserCare, Inc.
6
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The table below sets forth the high and low bid price of the common stock
through February 29, 1996, as reported by the National Quotation Bureau. Such
over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down, or commissions, and may not necessarily represent actual
transactions.
FISCAL YEAR ENDING
FEBRUARY 28, 1995 HIGH LOW
-------------------- ----- ----
1st Quarter $ .30 $.25
2nd Quarter $ .28 $.06
3rd Quarter $ .50 $.06
4th Quarter $.125 $.06
FISCAL YEAR ENDING
FEBRUARY 29, 1996
--------------------
1st Quarter $.125 $.06
2nd Quarter $.125 $.03
3rd Quarter $ .06 $.03
4th Quarter $ .19 $.03
As of April 19, 1996, the Company had 476 shareholders of record. The Company
has never paid any cash dividends and has no plans to pay any cash dividends in
the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
LIQUIDITY
The Company had total liabilities of $74,558 and a working capital deficit of
$74,366 as of February 29, 1996 as compared to $112,541 for February 28, 1995.
This decrease in working capital is attributable to the lack of operating
revenues coupled with continuing expenses. The Company believes that cash flow
from the private placement of common stock will be sufficient to meet the cash
requirements for operations over the next twelve month period.
PLAN OF OPERATION
Year Ended February 29, 1996 compared with 1995
- -----------------------------------------------
There were no revenues from continuing operations for the fiscal years ended
February 29, 1996 and February 28, 1995. Expenses increased from $37,196 in
1995 to $85,840 in 1996. The Company is considered to have re-entered the
development stage effective March 1, 1995 upon the sale of its last operating
unit. In fiscal 1997, the Company plans to keep all expenses at a "bare bones"
minimum until sales revenue is large enough to carry the operating expenses. A
small public offering of up to $500,000 is planned, and until this has been done
7
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(CONTINUED)
and the Company is generating income, some of the larger investors have agreed
to purchase enough of the Company's stock to meet all obligations.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995: The information contained in the preceding paragraph is forward looking
and involves risks and uncertainties that could significantly impact expected
results. While it is impossible to itemize the many factors and specific events
that could affect the outlook of any company, the Company's outlook for fiscal
1997 is predominately based on its interpretation of what it considers key
economic assumptions.
ITEM 7. FINANCIAL STATEMENTS
The information required by this item is included in a separate section of
this Annual Report beginning on Page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
(A) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Company, pursuant to its by-laws, maintains a Board of Directors of three
members and as of February 29, 1996 had these executive officers elected by the
Board of Directors on February 28, 1996:
<TABLE>
<CAPTION>
Name Position Held Age Dates of Service
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lucien Hugh Cullen Chairman, Secretary-Treasurer 75 February 27, 1995 to date
Leon D. Hogg President, Chief Executive 76 February 27, 1995 to date
Robert C. Meador, Jr. Vice President 34 February 28, 1996 to date
</TABLE>
All Directors of the Company hold office until the next annual meeting of
shareholders and until their successors have been elected and qualified.
Vacancies in the Board of Directors are filled by the remaining members of the
Board until the next annual meeting of shareholders. The officers of the
Company are elected by the Board of Directors at its first meeting after each
annual meeting of the Company's shareholders and serve at the discretion of the
Board of Directors or until their earlier resignation or death.
8
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ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
(CONTINUED)
(B) BUSINESS EXPERIENCE
Lucien Hugh Cullen, Age 75. Mr. Cullen has over forty (40) years of general
experience in the management of business involved in oil operations, chemicals,
mining and the management of investments. For the twelve (12) years prior to
his joining the Company in February, 1995, Mr. Cullen was the Chief Executive
Officer of Twentieth Century Pipe and Equipment Company, a specialized line pipe
company that he formed in 1982. Mr. Cullen began his education at Rice
University, then transferred to the University of Texas. After a three (3) year
interruption for military service in 1942-45, Mr. Cullen completed his education
at Glendale College, California and the University of Houston. He has both a
Bachelor of Arts and Master's degree in Business Administration.
Leon D. Hogg, Age 76. Mr. Hogg has been a Director and Officer of the Company
since February 27, 1995. Mr. Hogg has been involved in the commercial banking
industry in Houston for the last twenty-eight (28) years. From 1962 through
1970 he was a senior commercial lending officer with two Houston banks. In 1970
he formed Lee Hogg & Company, Inc., Mortgage Bankers and Financial Consultants,
and has been continuously involved with that company prior to joining Therapy
Lasers, Inc. Mr. Hogg obtained a Bachelor of Science degree from North Texas
State University in 1942 and has subsequently taken a number of advanced
banking, law and accounting courses from the American Institute of Banking.
Robert C. Meador, Jr., 34. For the past ten years employed by Gulf Coast Fan &
Light Inc., the last 1 1/2 years as Vice President. In 1992, he became
President of Ceiling Fans Direct, Inc. where he served until 1994 when he became
President of Laser Care, Inc.
ITEM 10. EXECUTIVE COMPENSATION
(A) SUMMARY COMPENSATION TABLE
No executive of the Company was paid more than $60,000 during the fiscal years
ended February 28, 1995, or 1996. In 1995, Thomas Loyd, then Vice-President,
was paid $10,800 total before leaving the Company. No other officer was paid
cash in 1995 or 1996.
(B) OPTION AND LONG-TERM COMPENSATION TABLES
There has been no restricted stock awards, stock options, SAR's, LTIP payouts
or other forms oflong-term compensation paid to any officer or director of the
Company during the last three years, except for certain stock options granted to
former officers which either expired without being exercised or were canceled by
the Board of Directors on March 24, 1995. Subsequent to February 28, 1995, the
Board of Directors granted stock options as follows:
Granted to Number of Shares Vesting Schedule Option Price
- --------------------------------------------------------------------------
Lucien Hugh Cullen 80,000 20,000 s/s Quarterly $.05 / Share
Leon D. Hogg 80,000 20,000 s/s Quarterly $.05 / Share
9
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ITEM 10. EXECUTIVE COMPENSATION (CONTINUED)
All of the above options expire at the end of three years (March 24, 1998).
(C) PENSION PLANS AND OTHER BENEFIT OR ACTUARIAL PLANS
The Company has no annuity, pension or retirement plans, nor other plans whose
benefits are based on actuarial computations.
(D) EMPLOYMENT CONTRACTS AND TERMINATION AGREEMENTS
The Company has no employment contracts or termination agreements with any
officer, director or key employee.
(E) DIRECTOR COMPENSATION
The Company has no standard arrangement by which its directors are
compensated.
(F) COMPENSATION COMMITTEE REPORT
The Company's Compensation Committee consists of Lucien Hugh Cullen, Leon D.
Hogg and Robert C. Meador, Jr., who administer the Company's Stock Option Plan
which was adopted March 12, 1996.
(G) STOCK PERFORMANCE CHART
A graph comparing the Company's commutative total return to stockholders in
terms of stock price appreciation plus dividends during the previous five years
to a broad market index, such as the S&P 500, has not been presented due to the
Company's operating losses in recent years and the resulting lack of any
significant stock price appreciation or dividends.
(H) INTERLOCKING RELATIONSHIPS OF DIRECTORS
Robert C. Meador, Jr. is also a director of the wholly owned Laser Care, Inc.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table set forth, as of April 16, 1996, the stock ownership of
each person known by the Company to be the beneficial owner of five percent or
more of the Company's common stock. Unless otherwise indicated, each person has
beneficial voting and investment power with respect to the shares owned.
10
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<TABLE>
<CAPTION>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT (CONTINUED)
NAME/ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENTAGE OF TOTAL
-------------------------------- ---------------- -------------------
<S> <C> <C>
Charles E. Sheffield 4,087,817 43%
6026 Dashwood
Houston, Texas 77081
Gulf Coast Fan & Light, Inc. (A) 529,269 5.6%
6026 Dashwood
Houston, Texas 77081
U.S. Design & Construction Corporation 143,769 1.5%
10850 Richmond Avenue, Suite 216
Houston, Texas 77042
(A) Controlled by Charles E. Sheffield
</TABLE>
The following table sets forth, as of April 19, 1996, the common stock
ownership of all officers and directors of the Company:
<TABLE>
<CAPTION>
NAME/ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENTAGE OF TOTAL
-------------------------------- ---------------- --------------------
<S> <C> <C>
Lucien Hugh Cullen 224,000 2.3%
4529 Tonawanda
Houston, Texas 77035
Leon D. Hogg 228,000 2.4%
6701 Sands Point, Suite 15
Houston, Texas 77074
Robert C. Meador, Jr.
10850 Richmond, Suite 216 287,539 3.0%
Houston, Texas 77042
All Officers and Directors as a Group 739,539 7.8%
(3 persons)
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company had entered into an exclusive contract with Gulf Biomedical
Corporation ("GBC") on September 1, 1990, granting GBC exclusive rights to
market the He-Ne laser for guaranteed payments of $50,000 per month. GBC, which
was an affiliate of the Company, had not performed on the contract during 1994
and 1995, due primarily to the Company's inability to secure approval for the
He-Ne Laser from the FDA. The Company
11
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED)
rescinded this contract in April, 1995. In connection with the resignation of
the founders of the Company in 1995, the receivable from GBC in the amount of
$192,958 was written off as uncollectible, and was deemed to be a preferential
dividend for accounting purposes.
Subsequent to the stockholders' meeting on February 27, 1995 in which the
Company's founders resigned, the Company transferred all of the net assets of
its Wellness division to American Medical Corporation, an unrelated company, in
exchange for cash, assumption of certain Wellness indebtedness by the Company,
forgiveness of Wellness debt owed to the Company and other consideration
aggregating $82,000.
The founders (Mr. Little and Dr. Ericsson) and certain of their affiliates
subsequently returned a total of 1,752,460 shares of the Company's stock, which
was then canceled by the Company. In partial exchange for this return of stock,
Mr. Little's spouse obtained release from personal liability as a guarantor on
certain of the Company's existing indebtedness.
On March 12, 1996, Therapy Lasers, Inc. acquired 100% ownership of LaserCare,
Inc., a Delaware corporation, which has designed a hand-held 10 mW laser that is
planned to be manufactured in Mexico and distributed in Mexico, Central and
South America, and eventually in Europe and the Orient. The acquisition was in
exchange solely for the shares of the corporation in a tax free reorganization
under Section 368(a)(1)(b) of the Internal Revenue Code of 1986, as amended.
(A) COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and greater than ten-
percent shareholders are required by the Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
The Company's current management has insufficient information to determine
whether during the period from March 1, 1995 to February 29, 1996 all Section
16(a) filing requirements applicable to its former officers, former directors
and greater than ten-percent beneficial owners were complied with.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
The information required by this item is included in a separate section of
this Annual Report beginning on Page F-1.
12
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
THERAPY LASERS, INC.
By: /s/ Lucien Hugh Cullen Date: 9/11/1996
----------------------------------------- -------------------
Lucien Hugh Cullen, Chairman of the Board
Secretary-Treasurer
In accordance with the Exchange Act, this report has been signed below by the
following persons, on behalf of the Registrant and in the capacities and on the
dates indicated.
NAME TITLE DATE
- ----------------------- ------------------------ -------------------
/s/Lucien Hugn Cullen 9/11/
______________________ Chairman of the Board, ____________, 1996
Lucien Hugh Cullen Secretary-Treasurer
Director
/s/Leon D. Hogg 9/11/
______________________ President, ____________, 1996
Leon D. Hogg Chief Executive Officer,
Director
/s/Robert C. Meador, Jr. 9/11/
______________________ Vice President, _____________, 1996
Robert C. Meador, Jr. Director
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANT WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT:
NOT APPLICABLE.
13
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EXHIBIT 22.1
LISTING OF SUBSIDIARIES OF REGISTRANT
Name Percentage Owned
---- ----------------
LaserCare, Inc. 100.00%
Houston, Texas
(acquired March 12, 1996)
14
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INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
REQUIRED BY ITEMS 8 AND ITEM 13
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
A. FINANCIAL STATEMENTS
--------------------
Reports of independent certified public accountants F-2
Balance sheet - February 29, 1996 F-4
Statements of loss for the two years ended
February 29, 1996 and February 28, 1995 F-5
Statements of stockholders' equity for the two years
ended February 29, 1996 and February 28, 1995 F-6
Statements of cash flows for the two years ended
February 29, 1996 and February 28, 1995 F-7
Notes to financial statements F-8
B. FINANCIAL STATEMENT SCHEDULES
-----------------------------
Schedules are omitted because of the absence of the conditions under which
they are required, or because the information required by such omitted
schedule is contained in the financial statements or the notes thereto.
C. REPORTS ON FORM 8-K F-16
-------------------
</TABLE>
F-1
<PAGE>
[BATEMAN, BLOMSTROM & CO. LOGO APPEARS HERE]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Board of Directors and Stockholders
Therapy Lasers, Inc.
Houston, Texas
We have audited the accompanying balance sheet of Therapy Lasers, Inc., (a
development stage enterprise) as of February 29, 1996 and the related statements
of loss, stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Therapy Lasers, Inc. (a
development stage enterprise) as of February 29, 1996, and the results of its
operations and cash flows for the year then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and development stage activities and has a working capital deficiency that raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Bateman, Blomstrom & Co.
BATEMAN, BLOMSTROM & CO.
Houston, Texas
April 29, 1996, except for Notes 10 and 11, as to
which the date is July 7, 1996
[LETTER HEAD APPEARS HERE]
F-2
<PAGE>
[PHILIP H. SALCHLI LOGO APPEARS HERE]
INDEPENDENT AUDITORS REPORT
---------------------------
The Board of Directors
Therapy Lasers, Inc.
Houston, Texas
I have audited the accompanying balance sheet of Therapy Lasers, Inc. as of
February 28, 1995 and the related statements of loss, stockholders' equity, and
cash flows for the one year then ended. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Therapy Lasers, Inc. as of February
28, 1995, and the results of its operations and cash flows for the one year
period ended February 28, 1995 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred a net loss, has limited capital
resources and negative working capital. Such matters raise substantial doubt
about the Companys ability to continue as a going concern. Management's plans
regarding these matters are described in Note 2. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
PHILIP H. SALCHLI, CPA
February 23, 1996
F-3
<PAGE>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash $192
Total current assets 192
-------------
Property and equipment, net 857
-------------
Total assets $1,049
=============
LIABILITIES
Current liabilities:
Accounts payable $15,000
Accrued expenses (Note 2) 23,964
Due to Laser Care, Inc. (Note 11) 6,000
Current portion of long term debt (Note 6) 3,632
-------------
Total current liabilities 48,596
-------------
Noncurrent liabilities:
Long term debt (Note 6) 25,962
-------------
Total noncurrent liabilities 25,962
-------------
Total liabilities 74,558
-------------
Commitments and contingencies (Note 8) -
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 100,000,000 shares authorized,
3,592,816 issued and outstanding 3,593
Capital in excess of par value 4,460,843
Accumulated deficit:
Prior operating accumulated deficit (4,452,105)
Accumulated during the development stage (85,840)
-------------
Total stockholders' equity (73,509)
-------------
Total liabilities and stockholders' equity $1,049
=============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-4
<PAGE>
<TABLE>
<CAPTION>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF LOSS FOR THE PERIODS ENDED
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
- --------------------------------------------------------------------------------
CUMULATIVE
MARCH 1,
1995 YEARS ENDED FEBRUARY 29/28,
----------------------------
THROUGH 1996 1995
FEBRUARY 29, (DEVELOPMENT (OPERATING
1996 STAGE) STAGE)
------------ --------------- ----------
<S> <C> <C> <C>
Developmental stage expenses:
Personnel and consulting costs $ 59,500 $ 59,500 $22,046
Rent and occupancy (Note 8) 4,450 4,450 3,103
Legal and professional fees 4,515 4,515 8,675
Depreciation and amortization 143 143 1,395
Other general and administrative 9,541 9,541 1,977
Interest 7,691 7,691 -
------------ --------------- ----------
Loss from operations, development stage (85,840) (85,840)
Loss from operations, operating stage (37,196)
Writeoff of investment (Note 9) - - (100,000)
------------ --------------- -----------
Loss before taxes on income, development stage (85,840) (85,840)
Loss before taxes on income, operating stage (137,196)
Provision for income taxes - - -
------------ --------------- ----------
Loss from continuing operations,
development stage (85,840) (85,840)
------------ ---------------
Loss from continuing operations, operating stage (137,196)
---------
Discontinued operations, applicable to period prior
to entering development stage (Note 3):
Income (loss) from discontinued operations 39,571 39,571 (53,395)
Loss on disposal of segment - - (559,358)
------------ --------------- ----------
Total income (loss) from discontinued operations 39,571 39,571 (612,753)
------------ --------------- ---------
$(46,269) $ (46,269) $(749,949)
============ =============== ===========
Net loss per common share:
Loss from operations before write-
down of investments $(0.0304) $(0.0097)
Write-down of investments - (0.0260)
Discontinued operations 0.0140 (0.1595)
--------------- ----------
$(0.0164) $(0.1952)
=============== ===========
Weighted average number of shares outstanding 2,823,953 3,841,491
=============== =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-5
<PAGE>
<TABLE>
<CAPTION>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
FEBRUARY 29,1996 AND FEBRUARY 28, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DEFICIT
PRIOR ACCUMULATED
ADDITIONAL OPERATING DURING THE
COMMON STOCK PAID IN ACCUMULATED DEVELOPMENT
SHARES AMOUNT CAPITAL DEFICIT STAGE TOTAL
--------- --------- --------- ---------- -------- --------
OPERATING STAGE:
Balances, February 28, 3,528,317 $ 3,528 $4,233,468 $(3,548,769) $ - $688,227
1994
Stock issued for debt 157,568 158 39,234 39,392
Sale of stock for cash 552,891 552 106,121 106,673
Stock cancelled (Note 3) (1,752,460) (1,752) 1,752 -
Cancellation of receivable
from affiliated company
controlled by former
CEO,
treated as a
preferential
dividend distribution (192,958) (192,958)
(Note 3)
Loss from continuing
activities (137,196) (137,196)
Loss from discontinued
operations (612,753) (612,753)
--------- ------- ----------- ------------ ------------ ---------
Balances, February 28, 2,486,316 $ 2,486 $4,380,575 $(4,491,676) $ - $(108,615)
1995 ========= ======= =========== ============ ============ =========
DEVELOPMENT STAGE:
Balances, February 28,
1995:
As previously reported 2,486,316 $ 2,486 $3,942,460 $(3,365,566) $(687,995) $(108,615)
Adjustments:
Recasting of writeoff
of
receivable (Note 3) (192,958) (192,958)
Restatement of loss
from
discontinued 438,115 (245,157) 192,958
operations
Reassessment of date
development stage began (687,995) 687,995
--------- ---- --------- ------- ------- ---------
As restated 2,486,316 2,486 4,380,575 (4,491,676) - $(108,615)
Stock issued for services 457,000 457 48,443 48,900
Stock issued for cash 649,500 650 31,825 32,475
Development stage loss
from continuing (85,840) (85,840)
activities
Income from discontinued
operations 39,571 39,571
--------- ------- ---------- ----------- --------
Balances, February 29, 3,592,816 $ 3,593 $4,460,843 $(4,452,105) $ (85,840) $(73,509)
1996 ========= ======= ========== =========== ========= ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-6
<PAGE>
<TABLE>
<CAPTION>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED
FEBRUARY 29, 1996 AND FEBRUARY 28,1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CUMULATIVE
MARCH 1,
1995
THROUGH YEARS ENDED FEBRUARY 29/28,
------------------------------------------------
FEBRUARY 29, (DEVELOPMENT (OPERATING
1996 STAGE) STAGE)
------------ -------------------------------------------------
Cash flows from operating activities:
Net loss $(46,269) $(46,269) $(749,949)
Adjustments to reconcile net income to cash
provided (used) by operations:
Discontinued operations (39,571) (39,571) 528,303
Depreciation and amortization 143 143 1,395
Stock issued for services 48,900 48,900 -
Writeoff of investments - - 100,000
Decrease in accounts receivable - - 2,300
Increase (decrease) in accounts payable (8,411) (8,411) 15,304
Increase (decrease) in accrued expenses 4,000 4,000 (7,955)
Other increases, net 6,000 6,000 -
------ ------ -------
Net cash provided (used) by
operating activities (35,208) (35,208) (110,602)
------ ------ -------
Cash flows from investing activities - - -
------ ------ -------
Cash flows from financing activities:
Proceeds from sale of common stock 32,475 32,475 106,673
Net change in short term debt - - 2,955
Net cash provided (used) by 32,475 32,475 109,628
financing activities ------ ------ -------
Net increase (decrease) in cash
and cash equivalents
(2,733) (2,733) (974)
Cash and cash equivalents, beginning of 2,925 2,925 3,899
period
Cash and cash equivalents, end of period $ 192 $ 192 $ 2,925
======== ======== =========
Supplemental cash flow disclosures:
Cash paid for interest $ 3,691 $ 3,691 $ -
Non-cash financing and investing
activities:
Stock issued to settle debt - - 39,392
Stock cancelled - - (1,752)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
F-7
<PAGE>
THERAPY LASERS, INC.
(a development stage enterprise)
Notes to Financial Statements
February 29, 1996 and February 28, 1995
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Following is a summary of the Companys organization and significant accounting
policies:
ORGANIZATION AND NATURE OF BUSINESS - Therapy Lasers, Inc. (the Company) is
a Nevada corporation engaged principally in organizational activities,
raising capital, and research and development efforts related to laser
technology in the healthcare field, and is seeking regulatory agency
approval to manufacture and market a medical laser device. The Company is
deemed to have been in the development stage since March 1, 1995. Prior to
that time, it was in the operating stage and was engaged in the sale and
rental of medical supplies and equipment; these operations have been sold
and/or discontinued.
In its current development stage, management anticipates incurring
substantial additional losses as it pursues its research and development
efforts until its laser products can be marketed.
On February 27, 1995, the Company changed its name from Medeci Corporation
to Therapy Lasers, Inc.
BASIS OF PRESENTATION - The accounting and reporting policies of the
Company conform to generally accepted accounting principles, and, effective
March 1, 1995, the accounting and reporting policies conform to generally
accepted accounting principles of development stage enterprises.
USES OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. The Company's periodic filings with the Securities and
Exchange Commission include, where applicable, disclosures of estimates,
assumptions, uncertainties and concentrations in products and markets which
could affect the financial statements and future operations of the Company.
PRINCIPLES OF CONSOLIDATION - The accompanying statements of loss and cash
flows for the year ended February 18, 1995 include the operations of
Wellness, Inc., a wholly owned subsidiary, through June 21, 1995. On that
date, the net assets of Wellness were sold to American Medical Corporation
(see Note 3).
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows,
the Company considers all cash in banks, money market funds, and
cetificates of deposit with a maturity of less than one year to be cash
equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS -
The Company has adopted Statement of Financial Accounting Standards number
119, Disclosure About Derivative Financial Instruments and Fair Value of
Financial Instruments. The carrying amounts of cash,
F-8
<PAGE>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
- --------------------------------------------------------------------------------
accounts payable, and accrued expenses approximate fair value because of
the short maturity of these items. The carrying amount of long term debt
approximates fair value because the interest rate on this instrument
approximates a market interest rate. These fair value estimates are
subjective in nature and involve uncertainties and matters of significant
judgment, and, therefore, cannot be determined with precision. Changes in
assumptions could significantly affect these estimates. At February 29,
1996, the Company had no derivative financial instruments.
EQUIPMENT AND FURNISHINGS - Equipment and furnishings are stated at cost
less accumulated depreciation, computed principally on the straight-line
method over the estimated useful lives of the assets. Estimated useful
lives approximate five years. Depreciation is taken on the straight-line
method for tax purposes also, using lives prescribed by the Internal
Revenue Code, which are similar to book basis lives.
Maintenance and repairs of equipment and furnishings are charged to expense
and new purchases and major improvements are capitalized. Upon retirement,
sale or other disposition, the cost and accumulated depreciation are
eliminated from the accounts, and any gain or loss is included in operating
income.
FEDERAL INCOME TAXES - Deferred income taxes are reported for timing
differences between items of income or expense reported in the financial
statements and those reported for income tax purposes in accordance with
Statement of Financial Accounting Standards number 109 Accounting for
Income Taxes, which requires the use of the asset/liability method of
accounting for income taxes. Deferred income taxes and tax benefits are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, and for tax loss and credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
company provides deferred taxes for the estimated future tax effects
attributable to temporary differences and carryforwards when realization is
more likely than not.
Differences between book and tax income arise primarily from the valuation
of stock issued for services.
NET INCOME PER SHARE OF COMMON STOCK - Net income per share of common stock
is computed by dividing net income by the weighed average number of shares
of common stock outstanding during the period, after giving retroactive
effect to stock splits, if any.
RECLASSIFICATIONS - Certain reclassifications have been made to the 1995
financial statements to conform to the 1996 presentation.
NOTE 2 - GOING CONCERN ASSUMPTION:
The Company has incurred net operating losses and negative cash flow from
operations in recent years, and
F-9
<PAGE>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
has disposed of its last operating subsidiary. As of February 29, 1996, the
Company had negative net worth in excess of $73,000 and no operating revenues.
Included in liabilities is a lien for approximately $29,000 in favor of a local
bank and a Federal tax lien for approximately $24,000 relating to unpaid payroll
taxes, both of which were incurred by prior management. Although the Company
realized approximately $32,000 in cash from sales of common stock during the
current year, and although management is currently seeking additional cash flow
through potential acquisitions and/or mergers with operating companies and is
seeking to establish sales channels for its products, primarily outside the
U.S., there is no assurance that these activities will be successful.
These factors create substantial doubt about the Company's ability to continue
as a going concern. The ability of the Company to continue as a going concern
is dependent upon (a) obtaining sufficient additional debt or equity financing
to finance operations, capital improvements, and research and development
activities, (b) attaining a profitable level of operations, (c) sales of
technology, (d) acquiring a profitable business, or (e) a combination of these
actions. The financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
NOTE 3 - DISCONTINUED OPERATIONS:
On February 27, 1995, the former executive officers and major stockholders of
the Company resigned and disassociated themselves from the Company. During
1994, the operations of the Companys Wellness, Inc. subsidiary had deteriorated
significantly due to the lack of working capital. As a result, the Company
determined effective February 28, 1995 (the measurement date) that it would
discontinue the Wellness business. The sale of the net assets of Wellness to
American Medical Corporation, an unrelated company, was completed on June 21,
1995 in exchange for cash of $5,400, assumption of Wellness indebtedness by the
Company, forgiveness of Wellness debt owed to the Company and other
consideration totaling approximately $82,000. Simultaneously, certain former
officers and affiliates returned 1,752,460 shares of Company stock for
cancellation in exchange for an agreement not to initiate litigation against the
former CEO for matters arising out of this transaction, and in exchange for a
release to the spouse of the former CEO from personal liability as a guarantor
on certain Company indebtedness. In addition, stock options held by the
retiring parties were canceled.
Income (loss) from discontinued operations consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY
29/28,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Total revenues $ 39,571 $ 95,928
Costs and expenses - 149,323
-------- -------
Income (loss) from discontinued 39,571 ($53,395)
operations ======== =======
</TABLE>
During the year ended February 29, 1996, the Company settled or compromised
several liabilities for less than recorded amounts which had been incurred in
prior years in connection with the discontinued operations. The settlements are
reflected in the accompanying statement of loss as income from discontinued
operations.
F-10
<PAGE>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
- --------------------------------------------------------------------------------
Loss on disposal of the segment during the year ended February 28, 1995 consists
of the following:
<TABLE>
<S> <C>
Excess of net book value of assets
sold, transferred, or written off
over proceeds from sale of
approximately $82,000 $559,358
========
</TABLE>
Due to the availability of a net operating loss carryforward, there was no
Federal income tax effect applicable to loss from discontinued operations or
loss on disposal of the segment.
Net liabilities of discontinued operations included in the accompanying balance
sheet are as follows:
<TABLE>
<CAPTION>
<S> <C>
Accounts payable $12,936
Accrued expenses 23,964
Long term debt 29,594
------
Total net liabilities $66,494
======
</TABLE>
Concurrent with the discontinuance of the Wellness operation and resignation of
the former executive officers, a receivable of $192,958 from a non-operating
affiliated company controlled by the former CEO was written off by a charge to
retained earnings; this item has been treated for accounting purposes as a
preferential dividend to the former CEO.
NOTE 4 - COMMON STOCK:
The Company has 100,000,000 shares of authorized common stock having a par value
of $.001 per share. Information relating to common stock are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Shares outstanding at year end 3,592,816 2,846,316
Weighted average number of shares
outstanding during the year 2,823,953 3,841,491
Stock issued for services:
Number of shares issued 457,000 -
Value of shares issued to officers
and directors for salaries and bonuses $ 48,900 -
Average value per share .1070 -
Stock issued for cash (including
officers and directors):
Number of shares issued 649,500 552,891
Total amount received $ 32,475 $ 106,673
Price per share $ .05 $.15 to $.25
</TABLE>
On March 24, 1995, the Company granted nonqualified options to certain officers,
directors, and key employees to purchase 200,000 shares of common stock at $.05
per share at any time prior to March 24, 1998. None of the options had been
exercised at February 29, 1996. No compensation expense was recognized upon
granting of the options.
F-11
<PAGE>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
NOTE 5 - RELATED PARTIES:
The Company had significant relationships and/or transactions with the following
related parties:
WILLIAM A. LITTLE, III - Mr. Little was formerly the Chief Executive
Officer and a director of the Company and has received shares of the
Company's common stock in lieu of salaries, bonuses and director's fees.
He and his spouse have also received stock for other services rendered (see
"Common Stock"). on february 27, 1995, mr. little resigned as an officer and
director, and returned 1,018,355 shares of his stock to the company (see
"Discontinued operations").
ARTHUR D. ERICSSON, M.D. - Dr. Ericsson was formerly Secretary and a
director of the Company and has received shares of the Company's common
stock in lieu of salaries and directors fees (see "common stock"). On
February 27, 1995, Dr. Ericsson resigned as an officer and director.
GULF BIOMEDICAL CORPORATION ("GBC") - GBC owed the Company $192,738 as of
February 28, 1994 on a non-interest bearing note that was partially secured
by assets of the former CEO. As part of the Company's reorganization and
discontinuance of its operations in 1995, this receivable was written off.
gbc currently owns 71,980 shares of the companys stock. GBC'S stock is
owned 100% by Mr. Littles adult son, Matthew C. Little.
NOTE 6 - LONG TERM DEBT:
The Company is obligated on a promissory note to a bank, resulting from the
discontinued operation of its Wellness business, having a principal balance of
$29,594, payable in monthly installments of interest only at 10% per annum
through July 5, 1996, then payable in monthly installments of $753, including
interest, beginning August 5, 1996, and having a maturity date of July 5, 2000.
The note is collateralized by a lien on all of the Companys assets. Maturities
of the note are as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28: AMOUNT
<S> <C>
1997 $ 3,632
1998 6,739
1999 7,445
2000 11,778
------
Total $29,594
======
</TABLE>
NOTE 7 - FEDERAL INCOME TAX:
The Company has not filed Federal income tax returns since 1991. As a result,
it is not possible to accurately determine the amount or expiration dates of net
operating loss carryforward available, although the carryforward is estimated to
be in excess of $1,000,000.
No provision for currently refundable Federal income tax has been made in the
accompanying statements of loss as no recoverable taxes were paid previously.
Similarly, no deferred tax asset attributable to the net operating loss
carryforward has been recognized, as its realization is less likely than not.
F-12
<PAGE>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
- --------------------------------------------------------------------------------
NOTE 8 - COMMITMENTS:
The Company occupies approximately 500 square feet of office space under a
month-to-month lease that requires monthly rentals of $445. The space is shared
with LaserCare, Inc. (see Note 11).
NOTE 9 - WRITEOFF OF INVESTMENT:
During the year ended February 28, 1995, the Company wrote off its remaining
investment of $100,000 in KLK Corporation, formerly an insurance holding
concern. In September, 1989, the Company acquired 25,000 shares of KLK
preferred stock, initially valued at $2,500,000, by the issuance of 295,000
shares of the Companys (then known as Medeci Corporation) common stock. In
November, 1989, as a result of certain adverse events suffered by KLK, the KLK
stock was written down to $952,250. In 1993, as a result of a series of
additional events, the Company stock originally issued to KLK fell into the
hands of certain KLK creditors. Ultimately, an agreement was reached with those
creditors, who were now shareholders of the Company, under which the Company
would receive approximately one-third of any proceeds from the sale by the KLK
creditors of the Companys stock. Therefore, the Companys investment was written
down in 1993 to $100,000, which approximated the then underlying market value of
the Companys interest in its own stock under the agreement with the KLK
creditors. During the year ended February 28, 1995, when the Company
discontinued its only operating activities, the remaining $100,000 investment
was written off by the Companys new management upon the determination that any
recovery from the agreement with the KLK shareholders was remote. Subsequent
collections under this agreement, if any, will be credited to income when
received.
NOTE 10 - REVERSION TO DEVELOPMENT STAGE ENTERPRISE - As indicated in Note 1,
the company has been a development stage enterprise since March 1, 1995.
Previously, it had been an operating company, and is deemed to have reverted to
a development stage enterprise effective March 1, 1995. Certain items of
income or expense incurred during the year ended February 29, 1996 related to
discontinued operations during the period when the company was an operating
entity. Accordingly, such items are not included in development stage loss.
The deficit accumulated while the Company was an operating company has been
segregated into a separate account from the development stage deficit since
accumulated.
NOTE 11 - SUBSEQUENT ACQUISITION:
On March 12, 1996, the Company acquired 100% of the stock of LaserCare, Inc. in
exchange for 5,750,776 shares of its common stock. A summary balance sheet of
LaserCare, a development stage enterprise, at February 29, 1996 follows:
F-13
<PAGE>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash $12,807
Advances receivable, Therapy Lasers, Inc. 6,000
------
Total assets $18,807
======
LIABILITIES
Account payable, affiliated company $ 290
------
STOCKHOLDERS EQUITY
Common stock 1,000
Capital in excess of par value 21,000
Deficit accumulated during the
development stage (3,483)
-----
Total stockholders equity 18,517
------
Total liabilities and stockholders equity $18,807
======
</TABLE>
The above summary balance sheet is based on financial statements on which the
auditors disclaimed an opinion due to uncertainty as to the collectibility of
advances to Therapy Lasers, Inc. and its ability to continue as a going concern.
As a result of this transaction, one individual now controls approximately 70%
of Therapy Lasers, Inc.s outstanding common stock. The transaction is expected
to be accounted for as a purchase, and was recorded at the net underlying assets
of LaserCare.
If the transaction had been completed on March 1, 1995, proforma results of
operations for the year ended February 29, 1996 would be as follows (including
operations of LaserCare, Inc. from its inception, March 28, 1995, through
February 29, 1996):
<TABLE>
<CAPTION>
THERAPY LASERCARE, COMBINED
LASERS, INC. INC. (PROFORMA)
---------------------------------------
<S> <C> <C> <C>
Developmental stage expenses:
Personnel and consulting costs $ 59,500 $ 59,500
Rent and occupancy 4,450 4,450
Legal and professional fees 4,515 $ 267 4,782
Depreciation and amortization 143 143
Other general and administrative 9,541 3,216 12,757
Interest 7,691 7,691
---------------------------------------
Development stage loss from (85,840) (3,483) (89,323)
operations
Discontinued operations applicable to
operating period prior to entering
development stage: 39,571 39,571
Income from discontinued operations
Net loss ($46,269) ($3,483) ($49,752)
=======================================
</TABLE>
F-14
<PAGE>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
In addition to the acquisition of LaserCare, the Company is actively seeking and
evaluating additional possible acquisition opportunities.
F-15
<PAGE>
C. REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
FINANCIAL
REPORT STATEMENTS
DATE TRANSACTION OR EVENT REPORTED FILED
- -------- ----------------------------- ----------
<C> <S> <C> <C>
- --------
02/27/95 Shareholders approve name None
change; new officers and
directors elected.
03/13/95 Corporate offices moved to a None
new address; retail location
in Texas City closed.
04/04/95 The Company acquired 1,018,355 None
shares of its own stock from former
CEO in exchange for release from
certain liabilities.
04/17/95 Update on new officers None
review of corporate accounts.
05/03/95 Announcement of preliminary None
merger negotiations with
laser manufacturer.
06/21/95 Finalization of sale of None
Wellness assets.
07/10/95 Resignation of Thomas Loyd None
as an officer and a director.
09/12/95 Former officer/director None
completes return of shares
of stock in the Company for
cancellation.
2/20/96 Resignation of C. Williams & None
Associates, P.C. as independent
certifying accountant
</TABLE>
F-16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF THERAPY LASERS, INC. AS OF FEBRUARY 29, 1996 AND FOR THE YEAR THEN
ENDED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> FEB-29-1996
<CASH> 192
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 192
<PP&E> 1,000
<DEPRECIATION> (143)
<TOTAL-ASSETS> 1,049
<CURRENT-LIABILITIES> 48,596
<BONDS> 25,962
0
0
<COMMON> 3,593
<OTHER-SE> (77,102)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 85,840
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,691
<INCOME-PRETAX> (85,840)
<INCOME-TAX> 0
<INCOME-CONTINUING> (85,840)
<DISCONTINUED> 39,571
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (46,269)
<EPS-PRIMARY> (.016)
<EPS-DILUTED> (.016)
</TABLE>
